Harnessing data efficiently

At a recent SAS Forum panel discussion in Sydney, leading executives from the Australian financial services industry discussed how effective use of analytics can lead to improved business efficiencies, writes Angela Faherty.

The way in which business analytics can enable performance and business decisions was the hotly debated topic at a panel discussion at last month’s SAS Forum in Sydney. High on the agenda was the issue of risk management and regulation, which five years after the onset of the Global Financial Crisis, has become heavily embedded in the industry on a local, national and global level. There is no debating the fact that regulation has become a burden, adding an extra layer of complexity to the financial services sector, with even the Reserve Bank of Australia admitting that the layers of regulation in the financial sector is not making life any easier for our banks.

Simplicity is key

Yet despite the onslaught of regulation, the biggest challenge facing banks is adapting to the changes at hand, which is where the importance of making effective business decisions that will benefit the business, shareholders and customers plays a key role. Kicking off the debate, the panellists discussed the future of the industry and the changing expectations of consumers. Vaughn Richtor, chief executive officer at ING Direct, said the unprecedented level of change witnessed in the industry over the last few years looked set to continue. He added that this is being heavily influenced by consumer demand and stressed the importance of meeting these needs in order to be successful.

“One of the challenges we have is we live in a world where our customers want more simplicity and want you to make it easier to do business with them,” he said. “At the same time you face the challenge of not only increasing complexity brought about by regulation, but increasing complexity within our business and as we get bigger, the broadening out of our product range. At the same time however, there is complexity around the amount of data we generate and can capture.” Referring specifically to the fact that customers want greater simplicity in product design and banking relationships, Richtor added that the biggest challenge was utilising data effectively and efficiently.

“It’s not just about producing more information,” he said, stating there were two key issues to be addressed. “The first is ensuring that before we produce the information to solve our problems, are we really clear that we’re asking the right questions? One of the problems with technology is that it allows us to produce massive amounts of data to do any analysis that we like. Before we go out and invest in analysis, we need to make sure we’re asking the right questions.” “The second thing that we have to understand that even if we ask the right questions, are we interpreting the data correctly? We need to figure out what is cause and what is just simply a counter relationship. Those are two key things that I think are very important,” he said.

Super challenges

The superannuation sector has also experienced a significant level of change, said Michael Monaghan, managing director at State Super Financial Services. Referring to the ‘double whammy’ of regulation in both the financial planning and superannuation sectors, Monaghan stressed how the changes have resulted in extra administrative work and less client facing activity. However, he said this was more a short term problem and stressed the greatest challenge was engaging with customers. “The real issue is around how to engage with customers,” he said. “I think the industry is going to use advice as a means of engaging with customers a lot more than they have in the past.

“Large superannuation funds have been too large and haven’t had the capability to deal with clients on an individual basis so they’ve tended to outsource a lot of functions. It’s their outsource providers who had the relationship with the clients. I think that has to change for a lot of the large institutions as they find a way to get closer to the customers.” Echoing Richtor’s comments, Monaghan added that the need to place greater focus on customer engagement will dominate the future of the sector. This is mainly due to the increase in awareness among consumers of the growing asset that is their superannuation fund.

“From the clients perspective what we’re finding is that many, many people were burned in the Global Financial Crisis. People in superannuation have much larger balances now than they did five or 10 years ago because they’ve had another five years’ worth of their superannuation guarantee flowing into their accounts. So they’re a lot more interested in that asset and they’re becoming a lot more demanding and critical of performance and about the way that we interact with them as an industry,” he said.

Silver lining

Despite the panel agreeing that the level of regulatory change has created additional complexities in the industry, Michael Pain, managing director ANZ at Accenture said that the future of the financial services industry looks very bright and stressed that the long term view is very optimistic. “I have a massively optimistic view of financial services in a strategic sense for a number of reasons: financial services organisations know exactly who their customers are, they get a lot of data about those customers from either a leading relationship or a superannuation relationship or an advice relationship, so they know a lot about their customers,” he said.

“And the nature of the services can be completely digitised, so I feel financial services is in a unique position albeit with some shortterm challenges to really evolve strategically towards the new world, the digitised world.” Discussing the world of analytics, Pain stressed the significance of the digital business model that has emerged in the last few years. Identifying the key characteristics of this emerging model, Pain said it was essential traditional financial services institutions embraced these features as new capabilities. “These characteristics include higher degrees of insight; responsiveness, so the speed with which you have to turn around your actions with customers and respond to customers. I also think there’s going to be a massive opportunity for cost effectiveness and of course, mobility. The mobile channels are going to be the way of the future,” he said.

Pain added that as well as this shift to a new business model, analytics itself will become more industrialised as the data captured by companies becomes more precious. “The IP that’s related to analytics; the algorithms and the intelligence that gives your organisation its edge, will have to be owned and managed very carefully as that will be the life blood of organisations,” he added.

The Aussie way

With many Australian financial services companies’ increasingly looking to improve their engagement with Asia, the panel discussion moving away from domestic shores. Mikael Hagstrom, executive vice president at SAS EMEA and APAC, said Australia had traditionally adopted a ‘wait and see’ attitude in its approach to analytics and customer engagement and stressed the importance of distinguishing between digitalising and digitalisation. “In terms of digitalising, if a bank had a million customers and now has 10 million customers that’s perfectly solved by rolling out new core banking systems but that’s going to large be an automation of existing processes.

It’s not necessarily going to change the way in which we interact with the customer, it’s not going to make the customer come and have a new experience,” he said. “I think digitalisation is more about moving off the value train and creating new services and products. I think we see that also in business intelligence world. Analytics to me is more about digitalisation, it would be a more data driven approach to the clients.” Hagstrom’s point was backed by Graham Mirabito, chief executive officer at RP Data, who said online and mobility are big trends globally in the financial services sector.

Particularly pertinent, was the fact that Australia has the highest level of tablet ownership in the world, with 25 per cent of Australians owning the device. “There’s 30 million mobile devices in Australia for 22 million people. We are absolutely on top of this,” he said. “I think the real challenge for all of us is how do you get the personalisation impact that has to come from digitisation?” Referring to the business opportunities presented by the rise of digitalisation, Mirabito said while mobility and social media are the main area of focus for many businesses, it was critical that institutions focus specifically on predictive analytics as that is what customers are demanding.

“What I think you’re seeing so far is a lot of attempts to get closer to the customer and I think over the next couple of years you’re going to see a lot more integration of devices,” he said. “What we’re seeing from our customers is a couple of things: they want help to interpret this information and take the actionable steps to get to know their customers better, such as not ringing them up a month after they’ve moved in and offer them insurance because you missed the boat. It’s about making it a lot more relevant, a lot more real. “The finance industry is the most trusted industry for the consumer, yet there’s so many applications from financial services companies that don’t identify the customer first. I think that’s the big trend you’re going to see in the next couple of years; financial institutions offering a lot more than just the immediate financial services and instead offering other sorts of applications that identify the customer immediately which will enable them to push rather than pull customers down different types of service paths,” he concluded.

Customer centricity

Looking ahead, the panel agreed that the short term future of the financial services industry was beholden to regulation, but stressed the long term vision was one of optimism as long as the business strategies were aligned with customer needs. One of the biggest challenges, the panel agreed, was effectively harnessing data analytics in the decision making process so that it delivered greater efficiencies for business and more relevant services for consumers, particularly around service integration.

“Most organisations are still on a journey to create the single view of a customer, to have a holistic view that is current, up to date, meaningful and useable. I think that’s always going to be a capability that organisations still need to invest in,” said Pain. “The other thing to mention is the linkages between banking, superannuation and the advice process. The interplay between these different elements of financial services is going to be a big focus for the next five years,” he said. Richtor agreed. “The other thing is to really understand what this customer-centricity means,” he said, “and is that what you reflect in how you run your business every day? “Being customer-centric means that, particularly in financial services, we’ve got to be a lot smarter about how we target our customers and the proposition that we give to them, because if I go back in time, banking used to be relatively simple. Today, it’s a lot more complicated and I think the challenge is not simply to rely on technology producing ever more information but are we interpreting that information correctly and being very focused on how you’re going to use that information in our business,” he said.

Categories
Banking
Tags:
SAS Forum, business efficiencies, effective analytics, risk management and regulation
Author:
Angela Faherty
Article Posted:
September 01, 2013

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